When newsrooms don’t own their data, other companies profit

Last Friday, the head of Bloomberg Media told The Guardian that publishers are “feeding on the scraps” of Facebook’s ad business. Justin Smith said that Facebook makes a lot more from ads in its News Feed than publishers do from linking content on the social network:

It’s a problematic situation. On its current trajectory this could not end well for the news business, and Facebook needs to think about this too, because they are reliant on each other.

I agree with Smith that this is problematic for the news business, but I’m not sure Facebook relies as heavily on the news as much as publishers like to think they do.

Shaver was referring to Foursquare. Last month, the social media app correctly predicted that Chipotle’s earnings would go down nearly 30 percent in their first quarter based on foot traffic data that Foursquare collects. They knew this, their CEO wrote, based on the aggregate data they collect from users:

At Foursquare, we have a trove of anonymous and aggregate data on where people go, based on the 50 million people who use our apps (Foursquare and Swarm) and websites monthly. Many users passively share their background location with us, which our technology can match up with our location database of over 85 million places, giving us clear insight into natural foot traffic patterns.

“What I find really interesting about Foursquare is that they started with a focus on delivering consumer value, and in delivering that value, they realized there was rich data being generated in the process,” Shaver says. “Foursquare is now selling enterprise products which use their customer data as the basis for analysis and insights.”

Foursquare isn’t the only company creating enterprise software from aggregate data. Ghostery, a browser extension that shows people how many ad trackers are on sites they visit, also collects data to sell to companies that want to know what tags and ads are being shown to their site visitors.

These enterprise data models can certainly generate revenue — but for whom? The publisher or the third party collecting the data can use the information, which raises some interesting questions: What data are news organizations providing to a third party? And what could the third party do with that data to target new or existing users?

Let’s consider a hypothetical, courtesy of Davis Shaver.

“What if we have a popular classified vertical...say boats,” he says. “And when a user comes to look at a boat, all sorts of interesting data comes along with that: what type of boat, where they’re looking at boats, etc.”

Right now, that data may be disseminated to any third parties on the site. That’s where things get tricky.

“[The third party] could then identify that user directly and serve them programmatic ads across the web, drawing them elsewhere,” says Shaver. “Conversely, if I put a moat around the interesting data, suddenly I have potentially a different business model. Maybe a boat dealer would pay 10x the normal eCPM to deliver very targeted boat ads through a first party Facebook-like targeting tool [on the news organization’s website.]”

Those insights could also be channeled into a newsroom’s other properties, he says.

“If programmatic lets us sell audience based on user attributes versus content attributes, how should a sustainably minded newsroom incorporate that insight into its prioritization?” asks Shaver. If the data shows that users with diabetes are more valuable, "does that mean I request a bunch of diabetes-related content? What if, by requesting that content, we change the rate that folks will pay for it because we’re glutting the market?”

Take ListeningNYC, a mobile app that helped people map sounds across New York to help prioritize on-site noise inspections. Or WNYC’s Cicada Tracker, which asked people to put a home-built sensor in their backyards to track the emergence of cyclical cicadas.

“What does that look like without the device requirement and scaled 100x?” asks Shaver.

These questions are ones newsrooms should be asking themselves — and considering closely. If you’re giving away data, it’s likely someone is already thinking along these lines (or already acting on them). As aggregate data grows, those scraps publishers are feeding on from third parties will continue to get smaller and smaller, and may one day completely disappear — which means newsrooms will be on an even more problematic trajectory.